Top Analyst Lays Out Q1 Earnings Preview for Snap Inc (SNAP),, Inc. (AMZN) and Facebook Inc (FB)

Top analyst Mark Mahaney at RBC Capital is out with a confident research note setting high expectations ahead of earnings releases on Snap Inc (NYSE:SNAP),, Inc. (NASDAQ:AMZN), and Facebook Inc (NASDAQ:FB). Why is the analyst encouraging investors to ride the bullish bandwagon for these three internet players? From Snap’s millennial popularity thanks to its fresh technological tools to Amazon’s superb execution to  Facebook’s “dramatic” potential for upside, this top analyst is backing these stocks for the long-term.

Mark Mahaney has a very good TipRanks score with a 72% success rate and a high ranking of #14 out of 4,556 analysts. Mahaney garners 18.6% in his annual returns. However, when recommending SNAP, Mahaney loses 15.1% in average profits on the stock. When suggesting AMZN, Mahaney gains 36.2%. When rating FB, Mahaney yields 36.8%.

Snap Reigns as King of Innovation and Millennials

Rumor has it Snap could be reporting first quarter results for 2017 at the start of next month, and Mahaney sees an exciting path ahead for the popular Snapchat app parent company. Before its first quarter print, the analyst reiterates an Outperform rating on shares of SNAP with a $31 price target, which represents a 54% increase from where the stock is currently trading.

For the first quarter, and Snap’s starting quarter as a public corporation, Mahaney calls for $146 million in total revenue and ($182 million) in adjusted EBITDA, beneath the Street’s revenue projection of $158 million, but in range of the Street’s adjusted EBITDA expectation for ($180 million). Additionally, the analyst projects 7 million in Daily Active User adds coupled with $0.89 in ARPU. While the Street’s forecasts are sensible, the analyst comments “though visibility is admittedly very poor.”

“Snap has become an innovation leader – for both consumers and advertisers – in arguably the single fastest advertising medium today – Mobile. It has also emerged as one of the leading Media Platforms for Millennials. We believe that if it sustains its current level of innovation, it can sustain premium growth for a long time and scale to profitability. We believe SNAP has taken steps to ensure robust product innovation going forward. And we see the company’s current limited DAU base (158MM or ~1/10th the size of FB) and its current low ARPU ($1.05 or ~1/7th that of FB) as creating substantial growth opportunities. Also, we see FB & TWTR’s history providing evidence of SNAP’s ability to scale profitably,” Mahaney surmises.

TipRanks analytics show SNAP as a Hold. Out of 35 analysts polled by TipRanks in the last 3 months, 12 are bullish on Snap stock, 16 remains sidelined, and 7 are bearish on the stock. With a return potential of 16%, the stock’s consensus target price stands at $23.48.

Amazon’s Very Impressive Retail Revenue Growth

Amazon is estimated to release its fourth quarter results for 2016 at the end of the month, and Mahaney continues to be highly dazzled by the online auction and e-commerce giant’s retail segment. Even Amazon’s weaknesses in soft margin investments like Video, Fulfilment, and India, nonetheless demonstrate long-term profitable possibilities.

Therefore, the analyst reiterates an Outperform rating on AMZN with a price target of $900, which aligns with current levels.

For the fourth quarter of 2017, the analyst forecasts for the giant to bring in $34.6 billion in revenue, $907 million in GAAP operating income, and $1.07 in GAAP EPS (just below consensus of $1.09). While Mahaney’s revenue expectations fall under consensus, they rise ahead of AMZN management’s outlook at the mid-point, with his operating income forecast over consensus and at the peak of guidance.

From channel checks, the analyst finds Street expectations fair, seeing balanced likelihood for revenue upside compared to downside, with in fact the odds leaning in favor of EPS upside. Yet, the analyst does see the Street’s second quarter guidance as “a touch aggressive” regarding revenue and margin forecasts, which are “bracketable at best.”

Mahaney believes, “AMZN’s North America and International Retail revenue growth rates are extremely consistent and inherently very impressive. […] Then there’s AWS, which is growing faster and scaling profitability more quickly than we and the market thought possible. Fundamental trends remain intact and in terms of Q4, there were only two real surprises, FX headwinds were greater than expected and Q4 AWS price cuts had a bigger impact on Revenue and Segment Margin than anticipated.”

So, in the grand scheme, “What’s the Big Picture?” asks the analyst, concluding by pointing to a four-point overarching tale for the giant: “a) Amazon’s two key end-markets (Retail and Cloud Computing) are still only ~10% penetrated; b) Competitive Moats around AMZN are deepening; c) AWS is possibly the Biggest Mix Shift Story In Tech Today – 10% of revenue (AWS) growing 2X faster with 10X the margins as Core Retail; & d) Amazon’s execution is excellent.”

TipRanks analytics indicate AMZN as a Strong Buy. Based on 30 analysts polled by TipRanks in the last 3 months, 29 rate a Buy on Amazon stock while 1 issues a Sell. The 12-month average price target stands at $976.11, marking a nearly 9% upside from where the stock is currently trading.

Facebook Is Highly Attractive

Facebook is expected to post its first quarterly earnings for the year on May 3rd after market close. From Mahaney’s eyes, the social media titan is poised for success for the long game, thanks to some key substantial revenue growth drivers, like Instagram, Messaging, and future forays into Augmented Reality and Virtual Reality.

As such, ahead of earnings, the analyst reiterates an Outperform rating on FB with a price target of $175, which represents a 25% increase from where the shares last closed.

For the first quarter of 2017, Mahaney models for revenue to hit $7.75 billion, non-GAAP EBIT to reach $4.10 billion, and GAAP EPS to land at $0.78, slightly under consensus estimates for $7.82 billion in revenue, $4.26 billion in non-GAAP EBIT, and $0.86 in GAAP EPS. When taking under account channel checks and other data, the analyst sees the Street’s forecasts for the first quarter as “ballpark reasonable, though with limited room for upside,” and anticipates the titan to maintain its non-GAAP opex growth outlook of 47% to 57%.

“Facebook has continued to grow users at an impressively robust pace off a very large base,” notes Mahaney, who projects MAU growth of 14% year-over-year to 1.89 billion for the first quarter of 2017, as well as a hair raise for quarter-over-quarter in the DAU/MAU ratio to 66.2%. Considering the social media titan faces a far less challenging ad revenue comp, the analyst looks for ad revenue growth rate (ex-FX) of 51%. With Zuckerberg’s team having advised to expect this year to be an “aggressive investment year,” the analyst estimates a step down to a 52.9% non-GAAP operating margin.

“FB is pursuing a Tab Strategy – one for Marketplace a la eBay and one for Video a la YouTube. May work, may not. But the upside is potentially dramatic and the downside is limited. In the meantime, Core FB is growing extremely well, with almost unprecedented Ad Revenue growth consistency. More important, we believe that’s FB’s current low market shares – 15% of Global Online Advertising & 5% of Global Total Advertising – will help it maintain premium growth for a long time. And FB still has several new large revenue growth drivers (Instagram monetization, Messaging Platform monetization, AR/VR, etc […] On a growth-adjusted basis, we view FB shares as the most attractively valued of any of the Large Cap Nets,” contends Mahaney.

TipRanks analytics demonstrate FB as a Strong Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 34 are bullish on Facebook stock and 2 remain sidelined. With a return potential of nearly 16%, the stock’s consensus target price stands at $161.81.

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